”The Council of Administration of the NBR has analyzed and approved the Inflation Report, February 2025 edition, a document which incorporates the latest available data and information. According to the updated forecast, the annual inflation rate will fluctuate sharply in the first semester of 2025 - against the background of the two-way base effects that will manifest themselves over this time horizon - and in the second semester it will decrease on a higher trajectory than in the previous projection, remaining above the target range until the end of the current year. At the same time, after falling slightly below the upper end of the target range in the first months of 2026, the annual inflation rate will remain constant until the end of the forecast horizon, only marginally below the previous projection', the statement said.
Uncertainties and risks continue to surround the future conduct of fiscal policy, given, on the one hand, the presumed impact of the corrective fiscal-budgetary measures implemented or adopted so far and, on the other hand, the requirement for budgetary consolidation in line with the Medium-Term Budgetary and Structural Plan agreed with the EC and the excessive deficit procedure.
However, labor market conditions and the pace of wage growth in the economy remain a source of uncertainty and risks. At the same time, significant uncertainties continue to be associated with the dynamics of energy and food prices, as well as with the future path of the crude oil price, while notable risks stem from the trend towards an extension of trade protectionism, with a potential impact on the prices of other commodities, as well as on the prices of some intermediate and final goods.
Heightened uncertainties and risks to the outlook for economic activity, including medium-term inflation developments, are stemming from the war in Ukraine and the situation in the Middle East, but in particular from the performance of the global economy/euro area and international trade in the context of the US administration's trade policy measures, the central bank says. At the same time, the absorption and use of European funds, mainly those related to the Next Generation EU program, is conditional on meeting strict targets and benchmarks. They are, however, essential for achieving the necessary structural reforms, including the energy transition, as well as for counterbalancing, at least partially, the contractionary effects of geopolitical conflicts and budgetary consolidation.
The NBR notes that the monetary policy decisions of the ECB and the Fed, as well as the attitude of the central banks in the region, are also relevant.
On the basis of the assessments and data available at the moment, as well as in the context of high uncertainties, the NBR's Governing Council decided, in Friday's meeting, to maintain the monetary policy interest rate at the level of 6.50% per annum. At the same time, it was decided to maintain the interest rate on the lending facility (Lombard) at 7.50% per annum and the interest rate on the deposit facility at 5.50% per annum. The Council of Administration of the NBR also decided to maintain the current levels of the minimum reserve ratios for credit institutions' liabilities in lei and in foreign currency.
The NBR specifies that the decisions of the BoD aim at ensuring and maintaining price stability over the medium term, in a manner that contributes to the achievement of sustainable economic growth. The Governing Council reiterates that, in the current context, the balanced macroeconomic policy mix and the implementation of structural reforms, including through the use of European funds that stimulate the long-term growth potential are essential for macroeconomic stability and the strengthening of the Romanian economy's capacity to face adverse developments.
